Wednesday, July 11, 2012

Barclays: Too Big to Fail Poster child

The recent British uproar over the actions of Barclays—the second largest bank in the Brittan seems to indicate that these large “too big to fail” banks have failed to learn anything from the 2008 financial crisis. A disconcerting reality indeed for those of us on Main Street.
 Barclays was fined $453 million by British and American banking authorities for attempting to manipulate the London Interbank Offered Rate (LIBOR), this measures lending rates between banks, and operates as a benchmark to price trillions of dollars in derivatives, mortgages, and bonds.
The bank admitted that it lied about the interest rate at which it was borrowing to create the impression that it was a low risk borrower by its peers. While at other times, it lied to manipulate the value of derivatives tied to Libor to generate short term trading profits. 
If the second largest bank in Brittan can still engage in such shady tactics four years after major global financial crisis, what are the other “too big to fail” banks up to?
As reprehensible as the behavior of the big banks is, we need to blame governments as well for failing to punish the big fish of the banking industry while providing huge bailouts.
 This combination of actions sent the message that its’ okay to be risky because the government    will bail us out.”Congratulations governments, call me in two or three years when the financial system melts down again.

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